• Sale of goods from individuals or corporate to end-users.

• Retail in India occupies an important place in its economy.

• 14-15% which accounts to US $550 billion.

• Until recently was dominated by owner manned small shops.

RETAIL

ORGANISED(8% SHARES, EMPLOYS

5 billion)

DEPARTMENTAL STRORES

SUPEMARKET

HYPERMARKET

FACTORY OUTLET

KIOSK

UNORGANISED (92%

SHARES,EMPLOYS 3.5 billion)

LOCAL GROCERY

PAN SHOPS

PAVEMENT SHOPS

• Investment into the production or business in a country by a company of another

country.

•Either by buying a company or expanding operations.

• Types:

Horizontal FDI: Investment by a firm in a foreign interest that equals the

amount the company invests domestically in the same interest.

Vertical FDI: takes place when a firm through FDI moves upstream or

downstream In different value chains i.e., when firms perform value-adding

activities stage by stage in a vertical fashion in a host country.

What is FDI?

•Investment into the business of a country by another country.

•To establish a lasting interest in the investee economy.

Why FDI?

•When domestic capital is not sufficient for economic growth.

•Foreign capital during development of capital economy.

•To get scare productive factors like technical knowhow.

• In 2012 September india announced a 51% fdi In multi brand retail.

•Single brand retailers can own 100% in their Indian outlets like Nike, IKEA, Apple.

•Both multi-brand and single brand stores in India will have to source nearly a third of their goods from small and medium-sized suppliers.

•Multi-brand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to considerably reduce the post harvest losses and bring remunerative prices to farmers.

•The choice to allow fdi lies in the state governments’ laws and regulations.

• Ever since FDI in retail was announced, there have been clamors in all sections of the society.

• Catering to the sentiments of the society the state governments also protested in letting foreign investments into the country.

• The Centre thus handed over the choice of letting FDI to the State Governments. Thus allowing FDI or not lies with the laws of the State.

• The apprehensions of the people is three fold:

a) A section which welcomes fdi projecting the huge investments in infrastructure and thereby an increase in the employment levels.

b) Those who are skeptical about opening up of foreign retails, because of the fear that they might buy products from the world market. Thus affecting largely their profit margin.

c) Unorganized retail sector that fears elimination in the long run.

• 98% of the Indian retail sector is unorganized.

• It is heterogeneous : peddlers, street-vendors, push carts.

• They depend on small and medium enterprises for their supplies.

• Decline of rural economy has caused migration of people to urban areas.

• They resort to taking up unorganized retail.

• Thus the apprehensions are:

If retail giants enter they might have direct purchase from farmers and wholesale

Shops. Since local vendors cant fight they would be wiped out.

The foreign companies may purchase from anywhere in the world based on

economies of sale. This might hurt the local producers and suppliers.

•Because of the investment of foreign companies, job opportunities in areas like marketing, agro-processing, packaging, transportation, etc. will be created. According to the Government, 10 million new jobs will be created.

•Because of FDI, the post of middlemen in India will be removed. Because of that, farmers will get a good price for their crops and their exploitation will stop.

•Foreign companies will invest around $100 million in India. Because of that, infrastructure facilities, refrigeration technology, transportation, etc. will be renovated. That will lead to low-inflation rate.

•According to the Indian Government’s conditions, foreign companies have to source a minimum of 30% of their goods from Indian micro and small industries. This will provide the scales to encourage domestic manufacturing, by creating a big effect for employment and to upgrade the technology.

•Countries like China, Indonesia, and Thailand already have 100% FDI in retail. After allowing FDI in retail, these countries have experienced tremendous growth in the agro processing industry, refrigeration technology and infrastructure.

•Foreign companies will also create a supply-chain in the India market. Because of that, food which perishes due to bad infrastructure facilities and refrigeration, will not be wasted.

•FDI will lead to job losses. Small retailers and other small ‘Kirana store owners’ will suffer a large loss. Giant retailers and Supermarkets like Walmart, Carrefour, etc. will displace small retailers.

•Supermarkets will establish their monopoly in the Indian market. Because of supermarket’s fine tuning, they will get goods on low price and they will sell it on low price than small retailers, it will decrease the sell of small retailers.

•Jobs in the manufacturing sector will be lost because foreign giants will purchase theirgoods from the international market and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail. Although, our country had made a condition that they must source a minimum of 30% of their goods from Indian micro and small industries, we can’t stop them from purchasing goods from international markets as per WTO law. So after coming to India, they can reduce this 30% by litigating at the WTO.